Marvell Technology Group Ltd. (NASDAQ:MRVL) recently reported preliminary financial results for the quarter ended 2013-07-31. The company’s management reported a 10% increase in revenues from the previous quarter in its Q2 2014 earnings call. According to InsiderMonkey, Marvell stock which has soared 78% is a small-cap pick for many hedge funds. Based on MRVL’s preliminary result we analyze the company relative to its competitors in the semiconductor space; we recently published an earnings analysis of NVIDIA Corporation.
Are Marvell’s returns Sustainable? Find out with our in-depth fundamental analysis.
The table below shows the preliminary results along with the recent trend for revenues, net income and returns for Marvell Technology Group Ltd. (NASDAQ:MRVL)
| Quarterly (USD million) | 2013-07-31 | 2013-04-30 | 2013-01-31 | 2012-10-31 | 2012-07-31 |
|---|---|---|---|---|---|
| Revenues | 807.1 | 734.4 | 775.3 | 780.9 | 816.1 |
| Revenue Growth % | 9.9 | (5.3) | (0.7) | (4.3) | 2.5 |
| Net Income | 61.8 | 53.2 | 50.2 | 68.8 | 93.1 |
| Net Income Growth % | 16.2 | 6.1 | (27.1) | (26.1) | (1.6) |
| Net Margin % | 7.7 | 7.2 | 6.5 | 8.8 | 11.4 |
| ROE % (Annualized) | 5.7 | 4.8 | 4.4 | 5.8 | 7.7 |
| ROA % (Annualized) | 4.8 | 4.1 | 3.7 | 5.0 | 6.6 |
The Market Sees Faster Growth for MRVL
While Marvell’s revenues growth has been around the peer median in recent years (4.1% vs. 4.8% respectively for the past three years), the market gives its shares a higher than peer median PE ratio of 27.7. The market seems to see faster growth ahead.
Is Marvell Technology Group Under-investing?
The company’s annualized rate of change in capital of 0.5% over the past three years is less than its peer median of 13.7%. This investment has generated a peer median return on capital of 12.1% averaged over the same three years. The median return on capital investment on a relatively lower investment suggests that the company is under investing.
Earnings Quality: Possible overstatement of reported net income
Marvell’s reported net income margin for the last twelve months is around the peer median (7.6% vs. peer median of 7.8%). However, the company has also recorded a relatively low level of accruals (9.0% vs. peer median of 12.2%) which suggests possible overstatement of its reported net income.
The company’s accruals over the last twelve months are positive suggesting a buildup of reserves. But this level of accruals is less than the peer median — which suggests that while MRVL is building reserves, it is doing so in a relatively modest manner compared to its peers.
Peers used for Marvell Technology earnings analysis
Intel Corporation (NASDAQ:INTC), Texas Instruments Incorporated (NASDAQ:TXN), Broadcom Corporation (NASDAQ:BRCM), Linear Technology Corporation (NASDAQ:LLTC), NVIDIA Corporation (NASDAQ:NVDA), STMicroelectronics N.V. (NYSE:STM), LSI Corp (NASDAQ:LSI), ASM International NV (NASDAQ:ASMI), Cypress Semiconductor Corporation (NASDAQ:CY) and PMC-Sierra Inc (NASDAQ:PMCS).
